Financial losers send complaints flooding in

Swiss Bank Ombudsman Hanspeter Häni had his hands full last year Keystone

Bankers continue to take a battering as the number of complaints about bad advice and mis-sold products pile up, according to the Swiss Banking Ombudsman.

The Ombudsman has been nearly overrun with gripes that increased 250 per cent last year from 2007, and will keep coming for another two years. One observer accused professionals of “ripping off” layman investors.

The number of complaints rose to a record 4,144 in 2008 from 1,609 the previous year, according to figures updated since February. Poor investment and wealth management advice accounted by far for the biggest increase in moans, making up 43 per cent of the total compared with 16 per cent in 2007.

However, Ombudsman Hanspeter Häni found that the banks were only to blame in around a fifth of all cases.

Some 60 per cent of complainants were found to have been the architects of their own downfall by taking risks in full knowledge of the possible consequences. Of the other complaints that merited further investigation, only half were upheld.

“Hard sell”

A large proportion of these successful complaints involved products from failed United States investment bank Lehman Brothers and the collapsed Icelandic Kaupthing Bank. In most cases, it was found that customers had been poorly advised and sold inappropriate investments.

“We saw clients who were previously focused on saving suddenly investing in structured products after a hard sell,” Häni told swissinfo.ch. “We had cases where we deduced that clients had not been informed that the guarantee could fail. Some did not even know that the guarantee was not from their own bank but from another bank.”

Thousands of small investors in Switzerland grouped together to conduct successful private actions against Credit Suisse earlier this year to win compensation from the bank for Lehman Brothers investments that were not worth the paper they were written on when it went bust.

However, Häni emphasised that the majority of investors that complained were the victims of their own desire for profits when the going was good – despite numerous warnings from his office and other observers.

“It is understandable that people were over optimistic and forgot the dangers when things were going so well and they saw the opportunity of making some money,” he said.

“Zero sum game”

Ulrich Thielemann, an expert in financial ethics at St Gallen University, had a different take on the “irrational exuberance” of small time investors. He blamed the financial and political system that allowed the capital markets to get out of control, benefiting the few at the expense of the many.

“This bubble economy is a zero sum game in which the winners effectively ripped off other people who become the losers,” he told swissinfo.ch.

” They try to give the impression that we are in an economy of growth but most of this money was not real.”

“If you are in a casino you should know it’s a zero sum game but the professional players led us to believe that it was a positive sum game in which we are all the winners,” he added. ” This was not true and they knew it.”

Matthew Allen, swissinfo.ch

Swiss Banking Ombudsman

The Swiss banking ombudsman is an independent mediator whose services are free of charge. He deals with specific complaints raised against banks based in Switzerland.
The banking ombudsman also runs a contact office for persons searching for dormant accounts.

The organisation took up its duties in April 1993. Since then it has dealt with an increasing number of enquiries.

Hanspeter Häni has been the banking ombudsman since September 1, 1995. He is supported by a multilingual team of lawyers, economists and bankers.

The office of the Swiss banking ombudsman is supported by a foundation, established by the Swiss Bankers Association.

The foundation’s board consists of independent public personalities and appoints the ombudsman. Its president is Annemarie Huber-Hotz, who was previously the Swiss federal chancellor.